Moody's Announces That France's Debt Metrics Have Deteriorated And Are Now The Weakest Of All Aaa-Rated Peers

This is not what Europe needed, 6 days ahead of the G20 ultimatum's expiration for Europe to somehow fix itself, and hours after Deutsche Bank said the rating agencies may go ahead and put France on downgrade review. Just out "Moody's notes that the government's financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers." As for the timing... "Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures, while taking into account any potential adverse economic or financial market developments."

Full note:

Moody's issues annual credit report on France

Frankfurt am Main, October 17, 2011 -- In its annual credit report on France, Moody's Investors Service says that the country's Aaa rating with a stable outlook reflects the French economy's strength, the robustness of its institutions and very high government financial strength.

The rating agency's report is an update to the markets and does not constitute a rating action.

France's sustainable GDP growth has been supported by the economy's large size, high productivity, broad diversification and its track record for innovation, together with high private sector savings and an only moderate built-up of household and corporate liabilities. In Moody's opinion, these features provide ample capacity to absorb shocks -- as demonstrated by the resilience of domestic demand during the global crisis -- although some risk factors (such as the weak prospects for global growth) continue to constrain medium-term economic performance.

However, Moody's notes that the government's financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers. Moody's nevertheless continues to deem France's financial strength to be very high, particularly when compared with debt affordability (interest burden in relation to government revenues) which remains comfortable. But very high debt finance-ability in an uncertain financial and economic environment, which is a crucial feature of Aaa governments, rests on investors' confidence in the government's ability and in its willingness to tackle unforeseen challenges. France may face a number of challenges in the coming months -- for example, the possible need to provide additional support to other European sovereigns or to its own banking system, which could give rise to significant new (contingent) liabilities for the government's balance sheet.

The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government's Aaa debt rating. Moody's notes that the French government now has less room for manoeuvre in terms if stretching its balance sheet than it had in 2008. France's continued commitment to implementing the necessary economic and fiscal reform measures as well as visible progress in achieving the targeted sustainability improvements will be important for the stable outlook to be maintained. Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures, while taking into account any potential adverse economic or financial market developments.

I hear Moody's repeating verbatim Reggie Middletons research ...'only' a year behind his more explicit and detailed warnings but remarkably for a CRA, weeks ahead of the carnage!

Maybe there was a major fuk-up in Moody's PR Dept and they pre-released their dull downgrade before the pre-selected time of their usual behind the curve (collapse) and absolutely worthless announcements?

S&P will soon follow with the chop to AA. Sarko's FrAAAnce just became FRAANCE. Time to dial in the French sovvereign debt CDSs on 10x leveraqge. And say goodbye to ESFS Sarko. Your banks are going down.

Here's the rub - Sarko is trying to charm Merkel into allowing the EFSF to become a bank, that will issue bonds, place with ECB and inject equity into French banks. It's a crazy and desperate idea, but the French ponzi, which has been growing since the era of de Gaulle, is about to reach the endgame.

The web of debt and deceit that exists between the French state, local governments, state owned businesses and banks cannot be resolved....

Table 4. Status of Multilateral Debt Relief Initiative Assistance <--- France will be on this list with the rest of Europe in 4.. 3.. 2..

Current Financial Arrangements (GRA, PRG)TermDefinitionArrangementsIMF credit is made available under a variety of borrowing arrangements with different disbursement schedules and maturities depending on the balance of payment needs of the member.GRAStand-By ArrangementsThe most common type of credit arrangement designed to provide short-term financial assistance. Purchases under Stand-By Arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.Extended ArrangementsExtended Arrangements provide credit for a longer period since these arrangements usually require fundamental reforms which may need more time to put in place and take effect. Drawings under extended arrangements are repayable in 12 semiannual installments 4½ - 10 years after disbursement.Flexible Credit LineThe Flexible Credit Line (FCL) has been established to allow members with very strong track records to access IMF resources based on pre-set qualification criteria to deal with all types of balance of payments problems. The FCL could be used both on a precautionary (crisis prevention) and nonprecautionary (crisis resolution) basis. Members may request either a one-year arrangement with no interim reviews, or a two-year arrangement with an interim review of qualification required after twelve months. Upon expiration, the Fund may approve additional FCL arrangements for the member. Access is determined based on individual country financing needs and is not subject to a pre-set cap. Purchases under FCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.Precautionary Credit LineThe Precautionary Credit Line (PCL) has been established to provide effective crisis prevention to members with sound fundamentals, policies, and institutional policy frameworks that have no actual balance of payments need at the time of approval of the PCL, but moderate vulnerabilities that would not meet the FCL’s qualification standard. Members may request an arrangement with duration of between one and two years. Access under an arrangement with one-year duration shall not exceed 500 percent of quota, with the entire amount being made available upon approval of such arrangement and remaining available throughout the arrangement period subject to an interim six-monthly review. Access under an arrangement with a duration of more than one year shall not exceed 1000 percent of quota, with an initial amount not in excess of 500 percent being made available upon approval of the arrangement and the remaining amount being made available at the beginning of the second year of the arrangement subject to completion of the relevant six-monthly review. Purchases under PCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement.PRG TrustECF ArrangementsConcessional arrangements providing credit in support of a three-year macroeconomic and structural adjustment program to eligible low-income members facing protracted balance of payment issues (formerly known as PRGF). The loans are repayable in 10 equal semiannual installments 5½ - 10 years after disbursement.ESF ArrangementsConcessional arrangements ranging from one to two years to provide financial assistance to low-income countries that are experiencing exogenous shocks but do not have an ECF arrangement in place. The repayment terms are identical to ECF arrangements.SCF ArrangementsConcessional arrangements ranging from one to two years to provide financial assistance to low-income countries that are experiencing short-term but not protracted balance of payments needs. The loans are repayable in 9 equal semiannual installments 4 - 8 years after disbursement. Interest on all PRGT loans (including outright drawings under the RCF) has been waived through end-December 2011.Arrangement DetailsIMF financial arrangements are reviewed regularly to assess progress in policy reforms. The disbursement of funds under an arrangement is linked to the achievement of certain financial targets.

I'm in Bavaria this week and will have a blow off dinner tomorrow night w/ all my German counterparts...can't wait to hear if any have woken up to what is going on, especially if Germany is about to be left propping all of EU on it's lonesome...up til now, none had really seriously considered or questioned their govs actions. Can't wait to see if anything has changed?

Note the Euro is not mentioned. It is the French. No, it is everyone. No its the sovereign others. The collective dufusi will end up blaming each other for everything, and we know how well that has worked out in Yurp.

Dude, seriously.Having dealt with folks all over the world there are true cultural difecences that stick in one's mind. Whilst wrestling with the French, all that matters is La France. Everything else is secondary to such priority of life, the universe and everything.It's a truism. Talk about the Euro, seriously, everything higes on La France.Talk about NATO, La FranceBEA syatems etc, when in UK/German/French partnership, it's France.Talk to a Frenchman about racial inequality, it's America, Le Baniuelles do not exist (It's France, la perfection.)

And man, are they touchy about it, too.Sensitive to the point of paranoia.I do not dislike nor disrespect them. It is what it is and this is what it is.

Agreed DZ, my guess is that Greece will shit the sheets brfore France and that should be the show stopper, then let the others fall like dominoes, as planned with impecable timing. Save the banks, screw Greece seems to be the mantra.

1.40 EUR end week!!! WTF do you smoke, you gotta drop sh*t real fast. This is pre-curser to the doomsday trade. This G20 thing they can't do crap, nothing. If they offer a 50% haircut, the banks will draw liquidity out of the EZ so quick...they tax the Germans 40%+ to beef up the bailout fund. The Germans will be rioting within a week. They leverage the ESFS fund via the ECB, watch the rest of the PIIGS yields go into hyper space as the whole EZ/banks/sovereign debt will look to be bailed out also.

This "idea" by Sarkockzy, Merkel and the EU/IMF doesn't exsist. That is wjy the markets sold off last session and will collapse into the red going into end week. The worry, Fed Evans (insane) offering that we all need inflation to create jobs.

No matter what the outcome, it renders fiat purchasing power ineffectual and the Dollar, Euro, Yen will all collapse. Against what, you might ask? Why gold, silver, oil and the grains, of course. Just think Zimbabwe...

I'm sure that we will see discussion of the role of ratings agencies in devaluing currencies. They appear to me to be hatchet men, working for the central banks. Extoting wealth out of nations has always been the agenda of central banks.